Stacey Higginbotham, in today's TechConfidential post, and this InfoWorld article (which is based on an IDC report - I don't have the link, but how's that for three degrees?) bring up some good points about IT standardization and merger integration. Two take-aways for entrepreneurs, especially at tech companies:
- While it is important to know what your potential acquirers' run under the hood, don't get too carried away. They probably all develop on different platforms, and the minute you switch they probably will to. That said, if you find everyone in your segment is standardizing, then you probably should to.
- Here's the bigger problem (particularly for software companies) - you're too smart, and for some reason (cost, pride, competition, too much time on your hands?) you'd rather build business process applications than buy them off the shelf. The only secret sauce at your company should be in the product(s) you sell. I've seen home-made accounting, billing, CRM, work-flow, SFA and HR systems to only name a few. They may work great for you, but for me they're an integration problem [read: your valuation is going down].
By the way, don't make the mistake of building the value of a non-core, home-grown application into your valuation case. I will agree with you as to its monetary value, then announce we're doing an asset deal, carving out the IP around the app, lowing the valuation by the agreed value of the app and letting you and your VCs keep it. I have yet to have any takers, so we've all agreed that the app is really worth nothing and the valuation goes down anyway.
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